The standard rules are applied if negotiations between the special negotiating body (SNB) and the competent organs of the participating companies fail. The standard rules cannot be rejected by the participating companies: either all companies accept them or they have to dispense with the SE altogether.
If the SNB has decided not to open or to abort negotiations, the standard rules are not applied. On the other hand, the two parties may decide on a voluntary basis to apply the standard rules.
Furthermore, the standard rules for participation are compulsory only if at least one of the companies was previously governed by participation rules. They are automatically introduced when at least 25% (merger SE) or 50% (holding/subsidiary SE) of the employees previously had participation rights (Art. 7 II Dir). If this threshold is not met, the SNB can decide to apply them anyway.
(> voting majorities)
The standard rules regulate information, consultation and participation. The member states must lay down standard rules which are in line with the standard provisions defined in the Directive’s Annex. The standard rules of the country in which the SE is to be headquartered will be applied.
The Directive contains general provisions on the standard rules (thereby limiting the options of the member states):
Overview of the main provisions:
(Part I) An RB is created for information and consultation. Its members are appointed or elected in accordance with the national legislation and practice. For every 10% of the total number of employees (or fraction thereof), a member state has the right to send one member to the RB. Thus, all countries concerned will have at least one representative in the RB. The RB is to form a select committee from among its members. After four years, the RB examines whether negotiations on an agreement (Art. 4) are to be opened or whether the standard rules should stay in force.
(Part II) The standard rules foresee the right to be informed and consulted on the basis of regular reports drawn up by the competent organ on the progress of the SE’s business and its prospects. The RB receives the agenda of the Supervisory Board or Board of Directors' meetings and a copy of all documents submitted to the general meeting of its shareholders. There must be at least one annual meeting with the competent organ. In exceptional circumstances (e.g. in the case of relocations, transfers, collective redundancies), the RB can demand an extraordinary meeting. If the competent organ thereafter decides not to act in line with the RB’s recommendations, the latter may request a further meeting in order to seek an agreement.
The workers' representation is entitled to a preparatory meeting prior to each meeting with SE management.
The RB has the right to ask for support through experts of its choice. These costs (which can be limited by the member states to one expert) and the general costs of the RB are borne by the SE. Many member states have limited the funding obligation of the company to a single expert. The members of the RB have the right to time off for training without loss of wages.
(Part III) Participation: in the case of an SE established by transformation, all prior participation rules remain applicable to the SE. In all other cases, the employees are entitled to elect or appoint some board members. Their number is equal to the highest proportion existing before in one of the companies. Their selection is made by the RB (according to the proportion of the SE’s employees in each member state). However, the member states could determine the allocation procedure for the seats on the administrative or supervisory board given to employee representatives from their country. The board members appointed by the employees must have the same rights and duties as those that are appointed by the shareholders.
(> application of the standard rules)
In general, the SNB takes its decisions (e.g. to conclude an agreement) by an absolute majority of its members which must also represent the majority of the employees. Each member has one vote.
However, if the decision should lead to a reduction of participation rights, a double 2/3 majority is required, i.e. at least 2/3 of the SNB members representing 2/3 of the employees. Moreover, the votes must come from at least two different countries. These high requirements are needed only when participation covered 25% (merger) or 50% (holding / subsidiary) of the employees. (Reduction of participation rights means a proportion of board members which is lower than the highest proportion existing within the participating companies).
A double 2/3 majority (see above) is also needed if the SNB decides not to open or to terminate negotiations.
(> possible results of negotiations)
In the eyes of the Commission, the European Company Statute (ECS) “will mean in practice, that companies established in more than one Member State will be able to merge and operate throughout the EU on the basis of a single set of rules and a unified management and reporting system. They will therefore avoid the need to set up a financially costly and administratively time-consuming complex network of subsidiaries governed by different national laws. In particular, there will be advantages in terms of significant reductions in administrative and legal costs, a single legal structure and unified management and reporting systems.” The Ciampi report estimates that savings in terms of administrative costs may be up to €30 billion per year.
Moreover, this new business form may have a value in publicity terms, as it indicates that this company is a “real European undertaking” thereby possibly removing e.g. psychological barriers.
However, this optimistic view is not shared by everyone. Indeed, the attractiveness of the ECS might be reduced because it de facto does not provide for one uniform European corporate form. In all matters that are not regulated by the Regulation, the SE will be governed by the company law provisions of the member state in which the SE is registered. Consequently, there will not be a single SE law but 30 SE laws which may diverge significantly from each other
As the title already suggests, the directive represents a supplement to the ECS with regard to the involvement of employees. No SE with employees can be set up without an arrangement for involvement of the employees.
Yes. The twelve new member states (Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovak Republic, Slovenia, Bulgaria and Romania) which joined the EU in 2004 and 2007 had to transpose the Directive, just like the other member states.
Companies coming from the (non-EU) countries of the European Economic Area – i.e. Iceland, Liechtenstein and Norway – have the right to establish SEs. Therefore, these states had to adjust their national legislation as well.
The Directive understands involvement of employees as “any mechanism, including information, consultation and participation, through which employees’ representatives may exercise an influence on decisions to be taken within the company” (Art. 2 Dir). Information stands for the informing of the employees’ representatives on matters which concern the SE (or which concern one of its subsidiaries in another member state or which exceed the powers of the decision-making organs in a single member state). The timing of the information and the manner in which it is supplied must be appropriate and its content adequate.
Consultation signifies the right of the employees’ representatives to express their opinion on measures planned by the SE. The timing, manner and content of this consultation must be such as to ensure that the opinion can be taken into account in the decision-making process.
Participation means the right to elect or appoint some of the members of the SE’s supervisory board (in two-tier systems) or administrative body (in one-tier systems). It may also signify the right to recommend or oppose the appointment of some or all members of these company boards.
The procedure is similar to that for which provision is contained in the European Works Council (EWC) Directive. Instead of prescribing detailed provisions on how employees have to be involved, the Directive provides for an agreement negotiated between the participating companies and a special negotiating body (SNB) representing the employees . Additionally, it provides for obligatory standard rules in cases where the negotiating partners fail to reach an agreement.
There is one major difference with the EWC procedure: No initiative by the employees is needed. In fact, it is the management or administrative bodies of the participating companies which have to take the necessary steps to start – as soon as possible – negotiations with the representatives of the companies’ employees on arrangements for the involvement of employees in the SE.
(> time frame for the negotiations)
An SE can have either a European Works Council, or a representative body (RB) but not both (> possible results of negotiations). An EWC is established only if the special negotiating body (SNB) decides not to open or to abort negotiations. In all other cases an RB is created as the transnational information and consultation body of the SE.
The SE Directive does not touch on national information and consultation rights. The “SE Works Council” (representative body) does not replace an existing national works council or trade union representation. Instead it creates an additional level of transnational information and consultation rights. In general, this is also the case for board-level participation rights.
If, for example, an SE is set up in the form of a newly founded holding SE on top of the national subsidiaries the board representation in the national subsidiaries remains untouched. However, if a national subsidiary ceases to exist as a legal entity the board-level participation ceases as well. In this case national information and consultation rights might be affected, for example, if a central or group works council had existed previously. The member states had the option to lay down a provision in their transposition laws that these representation structures be maintained after the registration of the SE.
Another exception is the transformation of a national public limited company into an SE. Here the participation scheme on the SE board replaces the former national representation scheme.